Frequently Asked Questions

 

What is the Financial Reporting Authority (FRA) (The Authority)?
 
The FRA (known by its counterparts world wide by its computer call sign “CAYFIN” is a Financial Intelligence Unit (FIU) created by the Proceeds of Crime Law (2008), which came into force on 30th September 2008.  It is the Cayman Islands' national agency responsible for receiving, and as permitted, requesting, analysing and disseminating disclosures of financial information concerning proceeds of criminal conduct, or in order to counter money laundering, terrorism, the financing of terrorism or suspicions of any of those crimes. This meets the Egmont Group definition of a FIU in every respect.  
 
What is the FRA Organisation?
 
The Authority consists of a Director, a Legal Adviser, an Accountant and other persons having suitable qualifications and experience necessary to perform the work.  For example, currently there are three financial analysts, a Law Enforcement Liaison Officer and an Office Administrator.  
 
The FRA office is located at 3rd Floor, Elizabethan Square, Georgetown, Grand Cayman. P.O. Box 1054 GT.
 
To whom does the FRA report?
 
The FRA is within the Cayman Islands Government Portfolio of Legal Affairs.  The head of this portfolio is the Honourable Attorney General.  However, the FRA also reports via the Anti-Money Laundering Steering Group (AMLSG), a body created by the same statute as the FRA.  Chaired by the Honourable Attorney General, the Group consists of the Honourable Financial Secretary (Deputy Chairman), the Commissioner of Police, the Collector of Customs, the Managing Director of the Cayman Islands Monetary Authority (CIMA) and the Solicitor General.
 
The AMLSG is responsible for the general oversight of the anti-money laundering policy of the Government. More specifically it determines the general administration, oversight and inspection of the work of the FRA including monitoring interaction and co-operation with overseas FRA counterparts and reviewing the FRA annual reports.  It also promotes effective collaboration between regulators and law enforcement agencies.
 
What does the FRA do?
 
Essentially, the FRA receives reports of disclosures of financial information, more commonly known as Suspicious Activity Reports (SARs) from any person wishing or obliged to make them.   A  Report Form is available from the FRA and it is included as Appendix J of the Guidance Notes issued under the PCCL Regulations which appear on the Cayman Islands Monetary Authority website at www.cimoney.com.ky.  The FRA analyses the SAR and, if appropriate, disseminates or onwardly discloses the resulting financial intelligence to those authorised to receive it.
 
FRA analysts will conduct their analysis by researching the elements of the report to match or link them with other information available, e.g.
 
·              Information from previous SARs already held on the FRA database. 
·              Publicly available sources such as company registers, credit reports, terrorist lists and specialist subscription internet websites
·              Government held databases such as police, immigration, property and  vehicles records,
·              Overseas counterpart FIU’s, particularly colleague members of the Egmont Group.
 
The purpose of the analysis is to establish whether a SAR alone, or together with any amplification or clarification, develops into financial intelligence pointing to possible money laundering or terrorist financing activity.  FRA analysts may look for patterns or trends used to disguise the illegal origin of funds. FRA members then combine and apply their skills, experience and judgement to assess each case outcome and determine whether it meets the required level of suspicion for dissemination or onward disclosure.
 
A daily deposit of cash into a cash intensive business bank account may not be at all be suspicious whereas same day deposits of even smaller amounts into accounts at several different branches at the same or other banks would be highly suspicious.  This is a simple example of where an individual or series of transactions may not seem significant but when combined with additional information becomes much more so.
 
What are “disclosures of Financial Information or SARs?”
 
Information is received by the FRA from a variety of sources worldwide but primarily SARs are received by the FRA from persons who are obliged by law to make them.  Information is also received from counterpart FIUs and from overseas law enforcement agencies. The PCL lays an obligation to disclose upon:
 
·      Any person who knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in criminal conduct (s.136 (1) (a) PCL). 
 
The information, which creates the suspicion or belief, has to be acquired in the course of the SAR maker’s trade, profession, business or employment.  
 
Who must report suspicious activity to the FRA?
 
A common perception is that this is a law for concern only by financial service providers (FSPs) but the obligation to report is upon a much wider field. Reports from the non-financial sector have become increasingly important as FSPs develop more sophistication in systems to detect suspicious activity within their business.  Criminals are thus tempted to use other businesses in consequence.  Lawyers, accountants, dealers in motor cars, precious stones, watches or persons engaged in realty sales or tourism are but examples of those, given the required knowledge or suspicion, of who must make a report to the FRA.
 
Apart from it being the right thing to do, there are two good reasons to make such reports.
First, it is an offence not to.  A finding of guilt for failure to report such suspicions or knowledge to the FRA is liable to an unlimited fine and/or five years imprisonment. (s. (142) PCL 2008). Secondly, the act of making the report provides immunity from committing offences when engaging in conduct that may otherwise be culpable. (s. (140) PCL 2008).
 
What powers does the FRA have to do its work?
 
The law does not (and probably could not) prescribe all the details a SAR must contain; the circumstances of each often being unique. Equally, a SAR may name other parties to the suspicious activity e.g. another FSP or professional adviser.  Therefore, the law does provide the FRA with a power to acquire additional information to analyse, (s. 4 (2) (c) PCL 2008), i.e.
 
·      To require the provision by any person of information for the purpose of clarifying or amplifying information disclosed in a SAR or responding to a request from an overseas FIU,  (legal advisors in privileged circumstances, e.g. Court work excepted).  Any person who, without reasonable excuse, fails to so provide the information is liable to a fine of CI$50,000 and or two years imprisonment.  The information must be provided within 72 hours.
 
Financial service transactions occur very quickly. Consequently, during the time required to receive, analyse and onwardly disclose to law enforcement, the funds that are the subject of the report can move beyond the reach of the investigating authorities.  Therefore, the law makes provision for the FRA to apply to the Grand Court to exercise its power to freeze funds for a limited period, (s. 4 (2) (b) PCL 2008), i.e.
 
·      To order any person to refrain from dealing with a person’s bank account for a period not exceeding 21 days.  The FRA and Grand Court must be satisfied that there is reasonable cause to believe that the information in a SAR or a request from an overseas FIU relates to the proceeds of criminal conduct, money laundering, terrorism or the financing of terrorism, or suspicions of these crimes.
 
The financial business of the Cayman Islands is predominantly international and the concept of financial confidentiality is both inter-agency and international.  Financial intelligence about terrorist financing particularly relies upon collaboration with overseas FIUs to gain insight into their networks, which may infiltrate many countries financial systems.  To acquire information from and provide information to authorised agencies and between nations and yet to retain measures of control over the use to which the information is put requires a detailed agreement between the concerned parties.  Therefore, the law provides a power for the FRA, subject to the consent of the AMLSG, to enter into such agreements, where the Director considers necessary or desirable for the discharge of FRA duties, (s. 4 (2) (e) PCL 2008).
 
The FRA may, with the approval of the AMLSG, issue guidelines setting out any features of a transaction that may give rise to suspicion of criminal conduct, the forms and procedures for making a SAR and the operational procedures of the FRA in connection with SAR handling.
 
To whom does the FRA disseminate or onwardly disclose information?
 
 The FRA operates at arm’s length from the police or other governmental departments and agencies to which it either must or may provide financial intelligence.  If the FRA suspects that information it receives to be criminal conduct or that it is prima facia evidence of criminal conduct then the FRA must inform a law enforcement agency in the Cayman Islands, i.e. the Royal Cayman Islands Police Service, H.M. Customs and Excise or the Immigration Department.  In such circumstances, the FRA may provide financial intelligence to the Cayman Islands Monetary Authority (CIMA) and, with the consent of the Honourable Attorney General of the Cayman Islands, the FRA may disclose information relating to criminal conduct to overseas Financial Intelligence Units.
 
 All information disseminated by the FRA must be in the context of criminal conduct which is defined by s. 144 PCL 2008.  If there is no such context, then the information it receives remains highly confidential and kept within the FRA.  The FRA thus walks a tightrope between the confidentiality sought by the Island’s finance industry and the nation’s quest to combat crime.
 
How does the FRA maintain confidentiality?
 
The PCCL restricts the provision of information it receives to certain circumstances and to authorised named parties only.  That law provides specific offences for and severe sanctions (up to a fine of CI$25,000 and/or five years imprisonment) upon FRA members in breach of the strict confidentiality provisions imposed upon them,  (s. 10 PCL 2008).   His Excellency the Governor has appointed each FRA Member after receiving assurances as to their character and following consultation with The Cabinet and the Anti-Money-Laundering Steering Group.
 
The FRA has modern information technology systems, which, together with its data and paper storage facilities, enjoy the highest levels of security to accord with the confidential nature of the work.
 
What is the purpose of disseminating information?
 
The PCL (2008) s. 138 provides that information disclosed by the FRA to those authorised to receive it must be in order to:
 
·      Report the possible commission of an offence
·      Initiate a criminal investigation
·      Assist with any investigation or criminal proceedings
·      Facilitate the effective regulation of the financial services industry or,
·      Generally give effect to the purposes of the PCL or any other law
 

More FAQ here....

 

More here